A Czech'ered past

By bne IntelliNews April 2, 2012

Nicholas Watson in Prague -

Groups of tourists led by tour guides in orange scarves and hats carrying orange clipboards emblazoned with the English words "Corrupt Tour" have become an increasingly common sight around various parts of the Czech capital since February. Milling around hospitals, tunnel construction sites and swanky villas, these tourists are part of a new itinerary, hosted by the Corrupt Tour Travel Agency, that ferries people to the centres of some of the Czech Republic's depressingly long list of corruption scandals. Although the tours started by the theatre impresario Petr Sourek are light-hearted in tone, they are an attempt to address a serious issue in the country, which Czech people are daily becoming more aware - and heartily sick - of: corruption.

The Czech Republic has now fallen as low as 57th place (out of 182 countries ranked) in Transparency International's 2011 Corruption Perceptions Index (CPI) - the world's most credible measure of domestic, public sector corruption.

This means the country is the 21st least corrupt place out of the EU's 27 states. Graft is estimated to cost the Czech economy about CZK100bn (€4bn) each year, with about 90% of that coming from public tenders, so it's clear where the focus needs to be applied.

The amount of savings from rooting out graft could be huge for the hard-pressed Czech taxpayer. The government's economic think-tank, the National Economic Council (NERV), says public contracts worth CZK630bn were drawn up in 2009. This is about 17% of GDP, so if savings of only 2% could be made, the amount would be comparable to the cuts in social expenditures for 2011, Prime Minister Petr Necas has pointed out.

Jana Ryslinkova, a former elected member of the Prague City Assembly, who spearheads the campaign to uncover the truth behind the fiasco of the tender for the Opencard system (one of the Corupt Tour's points of interest), says the money lost to corruption could be spent on things like the struggling educational system. "We are a small country with no natural resources. The only resource we have is our people and if they are not being educated properly, they are not being properly prepared to survive in the competitive 21st century," she says.

The issue is also harming the image of the country as an investment destination, just at a time when the economic crisis is making such capital scarce. "When I'm speaking with a potential investor, it is usually question number one - 'is it [corruption] as bad as I've heard?'" Weston Stacey, head of the American Chamber of Commerce and one of the founding members of Platforma pro transparentni verejne zakazky (Platform for Transparent Public Procurement), told bne last year. Fortunately, 2011 is being increasingly regarded as a watershed in the country's fight to clean up public procurement.

Small steps

In April 2011, the British engineering firm Mott MacDonald submitted a report to the NERV in which it detailed the many and varied ways in which contractors bump up the cost of major construction projects.

A major conflict of interest surrounds the companies that prepare plans for road construction and repair contracts, as they often also work for the winners of the tenders to build the roads. In practice, this means that the contractors get the nod from the coordinator for changes in the project's basic specifications, which boosts the final cost and helps them avoid being saddled with cost overruns.

Mott MacDonald also highlighted the lack of an independent inspectorate to check on the quality of construction, which has left motorways like the D47 unusable. "The biggest problem was that there was no independent check-up of projects and professionals were pushed out. Some projects were intentionally designed to be more expensive - and we know this was intentional ignorance on the part of the government," says Jiri Petrak, the recently retired managing director of Mott MacDonald's Prague office.

NERV then followed up in June 2011 with the unveiling of its own anti-corruption plan, which identified a series of problems with Czech tenders and 15 measures that should be taken in order to save tens of billion crowns from public budgets. Key amongst its proposals were: to prevent qualification criteria being applied that limit the number of bidders; to lower the cost threshold at which a public tender needs to be held, thereby stopping the practice of breaking up tenders into small amounts to avoid scrutiny; to publish tenders on the internet; and to protect corruption whistle-blowers.

This plan has led to the long-overdue public- procurement law, which is currently wending its way through parliament. Amongst other things, it will lower the thresholds for tenders for any procurement deals by central and local government bodies, and require the publication of owners of companies in tenders. Also that summer, the government endorsed the setting up of a new anti-corruption commission, on which will sit a variety of ministers and will be headed by Deputy Prime Minister Karolina Peake. The commission's work will involve scrutinising draft and existing legislation for any loopholes and drawbacks, while also proposing new legislation to fight corruption.

Against the backdrop of the deepening crisis in Europe, pundits like Erik Tabery, editor-in-chief of the weekly Respekt, also detected a sea-change in the public's attitude toward corruption in 2011. "I think a lot of things are changing, especially the social atmosphere has become increasingly critical of corruption," he tells bne.

One visible sign of this is the changing behaviour of politicians - and not just at election time. "For example, ministers leave their posts almost immediately after the scandals were revealed. Politicians began to realise that it is fatal for the parties to defend the bribers," Tabery says.

Tabery and others also point to the fundamental changes in the capital Prague, the nexus of money and power in the country. The current Prague Mayor Bohuslav Svoboda is credited by many with making a good start in cleaning up the capital's politics and business, and has not resorted to populist promises but prefers to rely on patient compromise to change the way things are done.

Not a moment too soon. The anti-graft umbrella organisation Naši politici earlier this year released the results of a survey of about 2,000 of Prague's biggest public tenders between 2006 and 2011 that showed an alarming number of connections between winning companies and sitting politicians. Using publicly available material, "we identified dozens of cases where fully or partially owned companies of elected representatives on the statutory organs of the city, or Prague districts, received significant shares of public tenders," Naši politici noted.

The appearance of Naši politici itself is a hopeful sign. Funded by the Endowment Fund Against Corruption, George Soros' Open Society Fund (OSF), and Trust For Civil Society in Central and Eastern Europe, it is one of a growing number of non-governmental organisations, or NGOs, that are dedicated to cleaning up corruption in the Czech Republic.

This year, the OSF's Prague chapter announced it will donate CZK11.5m toward a new anti-corruption and freedom of information initiative named after Otakar Motejl, a former Czech justice minister who until his death in 2010 was regarded by the Czech public as one of the country's most trusted civil ser vants. The Otakar Motejl Fund will work with other groups to promote honest government. "Now we invite all Czech citizens and businesses to join. It is up to us Czechs in what kind of country we shall live in," the Prague OSF said in a statement, echoing the feelings of many.

"Corruption will grow unless we are ever vigilant," says Ryslinkova. "Unless we all understand that it's our money and we protest, then we will not solve the problem. It requires that we understand a little more about what is required, get more involved - protesting when it's already a tragedy means it's already too late."

As is the way with these matters, success also brings its own set of problems, warns Tabery. "Various businessmen and groups are preparing for the next phase of gaining power and money: they're buying media, creating influential organisations and they want to legally get to the money flows," he says. "It will be a much harder period for society because this is not easy to detect."

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